U.S. Shale Gas Exports Face Hurdles, Former Exxon CEO Says

Political constraints and concern production gains at shale fields aren’t sustainable will hinder the development of liquefied natural gas export plants in the U.S., former Exxon Mobil Corp. (XOM) chief Lee Raymond said.

“There is going to be a big debate in the U.S. as to whether or not they’re going to permit the export of liquefied natural gas,” Raymond said in an interview in Oslo yesterday. “Even if you get past the politics, you have to test whether or not the resource base is sufficient.”

New techniques to access the natural gas trapped in shale rocks, including the use of hydraulic fracturing and horizontal drilling, have transformed the U.S. into the world’s largest gas producer. Estimates suggest fields in Pennsylvania, Ohio and Texas may contain as much as 862 trillion cubic feet of the fuel, enough to supply the U.S. for over thirty years at current consumption.

Politicians including Democrats Senator Ron Wyden of Oregon and Representative Edward Markey of Massachusetts have said exports may raise domestic gas prices. In allowing exports, the U.S. may be “trading away the enormous economic advantage of having large, low-cost domestic natural gas supply,” Wyden said in an e-mailed statement on Jan. 6. “It’s going to be a little while before people are really confident that there is going to be a sufficient amount of gas for 30 years to support the construction of an LNG plant,” said Raymond, who stepped down in 2005. “I’m frankly not sure that we have enough experience with shale gas to make the kind of judgment you’d have to make.”

Global Supply

Some gas-industry players are confident the U.S. will become a major exporter. BG Group Plc (BG/) said yesterday that the U.S. will be able to supply about 9 percent of global liquefied natural-gas output by the end of the decade. The U.K.’s third- largest gas producer said the U.S. will have the capacity to export about 45 metric million tons of LNG a year from 2020.

Rising production of natural gas has driven down prices and is leading owners of import terminals to explore exports. Cheniere Energy Inc. has proposed a liquefaction facility at its Sabine Pass terminal, which would be the first new North American export project since 1969. BG has a preliminary agreement to take gas from Sabine Pass.

The cost of building an LNG (LNG) terminal runs to billions of dollars. Cheniere’s Sabine Pass terminal will have a capacity of 9 million tons a year. Construction costs at projects underway in Australia, have reached $4,000 a ton of capacity, according to analysts at Sanford C. Bernstein & Co.

‘Huge Investments’

“If you build any LNG, from a producer’s point of view, you can only do that from an economic point of view if you’re assured that you have a long-term competitive supply because these are huge investments,” Raymond said.

Exxon, the world’s largest energy company by market value, is pursuing shale exploration in Argentina, Poland and the U.S. The company said earlier this month that two exploratory wells drilled in a Polish shale formation last year weren’t commercially viable. The gas discovered failed to flow in sufficient quantities Texas-based Exxon said Feb. 1.

“There’s lots of shale around the world, but just because it has the name shale on it doesn’t mean it’s something that would be economic to try to develop by the technique being used largely in the U.S.,” Raymond said.

Production of shale gas in China would be a “real game changer,” the former executive added. “China is run by engineers, it’s not run by politicians.”

“They’re technically competent and they approach things in the same way a good engineering group at a major oil company would approach things,” he said.

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Bibby Offshore, a provider of subsea installation, inspection, repair and maintenance services to the offshore oil and gas industry, has made several Board changes as part of a reorganisation of the... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Trans Adriatic Pipeline AG (TAP) has launched two pre-qualification contracts for the construction of the 105 km offshore pipeline section under the Adriatic Sea. The greatest depth the pipeline will... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Statoil has awarded the Johan Sverdrup SURF Detail Engineering and Services 2015-20 contract to IKM Ocean Design. Johan Sverdrup field is an oil discovery in production licenses PL265, PL501 and... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

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Technip has won a contract from Tupi BV, a consortium composed of Petrobras Netherland BV (PNBV, 65%), BG (25%) and Galp (10%), for the ongoing development of the Lula Alto field, located in the... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

DOF Subsea UK Limited, a provider of integrated subsea services, announced that its survey and positioning business in the UK and US has been awarded an extension of a Master Service Agreement with... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

McDermott has been awarded initial work for a significant power supply system replacement contract by Saudi Aramco for the Marjan field, offshore Saudi Arabia. Work is expected to be executed through... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

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